Google’s Gdrive has a huge revenue potential, analysts say

Wolfgang Gruener, 11th December 2007

El Segundo (CA) - Following media reports that Google is about to release an online storage space service to its users, analysts have started playing a numbers game whether such a service would actually be profitable for the company.

iSuppli estimates that about 4.2 million users could be using a Gdrive service initially – a number that could allow Google to offer 50 GB to every user while being able to rake in a substantial profit: According to iSuppli, Google would have to purchase 210,000 1 TB hard drives (to support 4.2 million users), for a cost of $0.25 per GB, representing a gross expense of about $52.5 million.

In return, Google could achieve average ad revenue of about $50 per user, translating into an annual revenue potential of $210 million.

“This would represent a good return for Google,” Krishna Chander, senior analyst for storage systems at iSuppli, said. “While a typical HDD supplier makes about an 18% gross margin for a desktop-PC-class hard drive, Google could command a gross margin of 75%. This would give Google more than four times the rate of return compared of the HDD suppliers.”

Google’s profits could be significantly higher, depending on its fee structure for storage exceeding 50 GB, the analyst noted.